Sunday, February 26, 2012

Many of the readers here know of my like (my better half would say addiction) for numbers, especially for experimental data analysis. While the numbers, the ups and downs of house prices, my chastising Marko for his use of the mainly meaningless average, my great thanks for Reid for unknowingly starting our family on a very good financial plan due to his writings on the blog a few years ago and Roger’s spreadsheets are all interesting, the bubble is not really a numeric event, it is instead a human behaviour phenomena. Ergo my alter ego ‘Animal Spirit’.

Animal spirit is a Keynesian term which Wikipedia states: “ describes emotions which influence human behaviour and can be measured in terms of consumer confidence”. Further, in 2009, Akerlof and Shiller published the book “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”.

Robert Shiller then paired with Karl Case in a 2010 publication to attempt to understand the U.S. housing bubble development and bust. Given that multiple major national newspapers, magazines and television stations that had previously been promoting housing as a great investment and buying choice have recently published substantive negative stories may affect confidence in the Canadian residential real estate market, this led me to the following excerpt from the link above:

“It may be in these changes (changing perception and changing information), more than in the quantitative expectations that we have recorded, that most explains the major trends in the market. Figure 16, which gives a scaled count of news stories with the term “housing bubble” in it, shows the major change in public thinking that began around the time when the housing boom of the 2000s first became apparent, and has grown steadily ever since. The story of a housing bubble is an invention of our times, an invention that is spreading to capture more and more of our thinking, and to create a fragility of expectations that was unknown in times past.

By the time of the 2006 survey, just around the time of the peak in prices, some new themes became commonplace in answers to the question as the event that changed the trend in the housing market. Answers included “reality adjustment of the market,” “fewer speculation buyers,” “media hype of housing bubble,” and “overheated market.”

By the time of the 2009 survey, when the market was starting its sharp recovery, the answers included even more references to speculation and bursting bubbles. People have not forgotten about their newfound knowledge of bubbles. As of the 2009 survey, we could not find any optimistic new themes that indicated a positive major turning point in the market, and are left with the suspicion that the turn upwards in home prices is supported more by the government’s short-term support of the housing market rather than any new speculative enthusiasm.”

How might this apply in Canada now that our national right wing magazine for the masses is publishing pictures of a burning house on its cover (h.t. patriotz, through vancouvercondo.info). Got any good links to sites discussing media impact on consumer behaviour (or a cheap blue bridge)?

Wednesday, February 8, 2012

2011 census data is out. If you think Victoria's housing "boom" was driven by an influx of people coming here, you may want to rethink that theory.

Turns out Victoria's growth lagged the provincial average over a 5 year period. Victoria grew at an annual average rate of 4.4%, which is down from the previous 5 year census period (5.8%). Victoria is growing. But it's not growing faster than elsewhere in BC, and in fact, it's not growing faster than most other cities of a similar size in Canada.

Victorians refuse to be counted: The percentage of population that didn't fill out the census forms was higher here so the data reflects that and not actual population growth.

It's too expensive: Canadians, especially new and young Canadians, can't afford to live in Victoria.

Job prospects are dim: sure there's some sunshine-taxed IT jobs around, and a plethora of government-benefit-slave-for-life type roles, if you're lucky enough to have an aunt in the HR department, but for the most part, jobs in the CRD aren't the kind people rush from elsewhere to get.

So why are prices so high? If new resident demand isn't driving prices, what is? Could it be a limited supply?

CMHC says the average annual housing starts in the CRD is 2063. The average number of men, women and children moving here annually is 3036. Considering most of us shack up with others and kids if you got 'em (average household member number is either 1.9 or 2.2 IIRC depending on dwelling type), is it reasonable to conclude that builders are likely building at least enough supply to meet the demand? I'd say so. And then some.

The point of this post isn't to harp on Victoria not being a wonderful city that's desirable to many: it is. The point of this post is to highlight the data. Whenever you hear from the usual suspects that Victoria housing prices are driven by from aways moving here because everyone wants to live in this wonderful city, you now know this to be a myth. It's simply not true.

What is true, is Victorians, whether they be life-long residents or relatively new, are willing, and seemingly able, to pay more for a house than their peers in other locales. I'd weight that statement heavily to the "willing" side. Victorians are responsible for the high home prices.

Sunday, February 5, 2012

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

February 2012 month to date

Net Unconditional Sales: 80

New Listings: 245

Active Listings: 3539

Sales to new listings ratio: 33%

February 2011

Net Unconditional Sales: 488

New Listings: 1276

Active Listings: 3714

Sales to new listings ratio: 38%

Sales to active listings ratio: 13% or 7.6 MOI

And we're off to the spring market. Looks like sales are starting pretty strong, but it's too early to really tell. Months of inventory has been high and putting pressure on prices. Can it continue as sales heat up?

Wednesday, February 1, 2012

Chances are if you've been kicking around old HHV's blog for the past 12 or 18 months, you'd have saved enough to get your hands on this beautiful German girl without doing anything at all.

How's that go HHV? We thought you would have given up smoking the BC when you left for greener and sunnier pastures just 7 short months ago?

Simple I say! If you didn't buy a Victoria median house last January, you would have saved yourself a cool $51,000, about enough to get yourself a BMW 3 series with a whistle and still have a $1000 to impress the ladies with! Sheeeet.

Median SFH prices fell $51,000 between January 2011 and January 2012. Average prices dropped from $597K to $567K - though the average is far less indicative of the market than the median.

Speaking of indicative of the market, did anyone else notice VREB's fancy schmancy new way of reporting the numbers. Now it could be coincidence, seeing as that it is the first reporting month of a new year and all, but the cynic in me would rather explain it as confusing on purpose. Switch up how you report your sales data and no one will know that prices fell almost 9% over the past 12 months.